An employee benefits specialist is a licensed advisor who focuses their practice specifically on employee benefits insurance. A “generalist” would be an insurance or a financial advisor who sells various insurance products and/or investments with employee benefits being only a part of what they do.
In fact, there are a large number of businesses in Saskatchewan who have their group benefits handled by an advisor who has only a handful (or less) of group insurance clients.
“The industry’s dirty secret is that 50% of group benefit cases sold each year are sold by advisors that sell 1 group or less a year. Can you imagine seeing a mechanic that only worked on one car a year? Or a doctor/dentist that only saw 1 patient? Would you trust your life and health to someone that was a part-timer?Dave Patriarche, founder of Canadian Group Insurance Brokers
Employee benefits plans are not so simple
The tricky part is that employee benefits is an area that tends to be quite complex. Details and nuances matter a lot. The client may be at risk of serious repercussions if something doesn’t go quite right. This creates a significant risk for your small business as well as to your employees and their families. To reduce this risk, a significant level of expertise is required from the advisor when dealing with complex claims and situations. This happens more often than most people think.
An important discussion that small and mid sized businesses should have with their benefits advisor is on how to create risk and liability reduction within your employee benefits plan. An employee benefits specialist will be able to audit (and continuously monitor) your benefits plan from the liability perspective and share strategies that your business can implement to reduce your risk.
Here are some example of where we often see liability issues:
Mandatory vs non mandatory plans
Your benefits plan is “mandatory” when 100% of eligible employees are required to join the plan. This makes the benefits plan a condition of employment. Employees who have coverage through a spouse have the option to waive the Health & Dental. However, they must remain on the plan for other benefit lines (such as life, disability and critical illness insurance components of your benefits program).
On the other hand, non-mandatory plans do not require all of the employees to participate in the company’s benefits program. Workers have the option to opt out of all benefits if they so choose. An example of a non-mandatory plan is a plan that requires 75% enrollment.
Carriers are now offering 75% enrolment options to small groups under 20 employees. However, many clients and advisors don’t understand the consequences of this type of structure. In fact, some people view non-mandatory plans as an advantage as they may offer more flexibility to employees. But, it is crucial to be aware of the consequences of this type of contract, and unfortunately these are not always obvious. In a non-mandatory contract, the insurer does not have any obligation whatsoever to cover an employee who is not a part of the plan. All too often, this problem arises when an employee who didn’t join the plan initially now has a serious health problem that requires insurance coverage (example: a high cost medication is required for a condition that an employee was diagnosed with).
Moreover, the onus is on the client to ensure that the minimum participation level is strictly maintained. If it is not, the client may be facing a breach of contract. The carrier then has the right to terminate the contract completely.
Other liability issues when it comes to employee benefits for small business
There are many other areas of the employee benefits contract that require a scan with a fine tooth comb. These include drug pooling levels, LTD non-evidence limits, and credibility factors for small businesses. Stay tuned for Part 2 of this blog where we will dive into explaining these areas in more detail.
Have questions about your employee benefits plan? Feel free to contact one of our employee benefits specialists.